Calling the deal very good for US farmers and manufacturers, Mr Trump said Mexico has agreed to purchase as much farm product as possible immediately.
The deal could replace the 24-year North American Free Trade Agreement (NAFTA), which also includes Canada.
Mr Trump has not yet begun negotiating with Canada, but has called on Prime Minister Justin Trudeau to lead negotiations fairly.
He announced the progress from the Oval Office, with Mexican president Pena Nieto joining in on speakerphone.
It’s an incredible deal for both parties, Mr Trump said.
The US presidents said he intended to terminate NAFTA while he pursues trade deals with Mexico and starts negotiations with Canada.
Mr Trump threatened to slap tariffs on Canadian cars if he does not get what he wants.
He said If they’d like to negotiate fairly, we’ll do that.
We could have a separate deal, or we could put it into this deal.
Mexican president Pena Nieto tweeted I spoke with Canadian Prime Minister Justin Trudeau on the state of the NAFTA negotiations and the progress made between Mexico and the United States.
I told him it was important that (Canada) rejoin the process, with the goal of concluding trilateral negotiations this week.
I talked to the President @realDonaldTrump. Mexico and the United States have reached a commercial understanding. We want Canada’s re-incorporation into talks to achieve a successful trilateral negotiation of NAFTA this week.
The future foreign minister, Marcelo Ebard, later added that it is vital to include Canada in the negotiations, to be able to renew the pact.
A spokesman for the Canadian foreign minister Chrystia Freeland said they had been in touch with NAFTA negotiators, and added We will only sign a new NAFTA that is good for Canada and good for the middle class.
Ms Freeland is to travel to Washington on Tuesday for talks.
Mr Trump has been critical of NAFTA, signed in 1994, which he blamed for sending US manufacturing jobs to Mexico. He previously called it a terrible deal.
He said it would be replaced in part by the newly named United States-Mexico Trade Agreement.
Negotiations for a new deal began more than a year ago and have proved difficult. Officials worked through the weekend to close differences.
The Office of the US Trade Representative said Mexico had agreed to ensure 75% of automotive content would be produced in the trade bloc to receive duty-free benefits. It’s also promised that 40-45% of it be made by workers earning at least £12.40 ($16) an hour.
News Source SkyNews